This paper derives optimal trade and domestic taxes for a small open economy containing a monopolistically competitive (MC) sector in which firms may have heterogeneous productivity levels. Domestic protection brings gains from expanding the number of product varieties on offer, but these gains...

We assess some likely consequences of commercial policy in an intertemporal CGE model of an imperfectly competitive, small open economy. Specifically, we combine an overlapping generations model of aggregate savings with capital accumulation by forward-looking investors and production under...

This paper analyzes the link between firm exports and the competitive environment in foreign markets. We derive a theory-based econometric specification linking destination-specific exports to foreign demand and the degree of 'crowdedness' of foreign markets. The latter is a measure of the...

In this paper, we analyze the effect of reducing import tariffs on intermediate inputs and final goods on the wage skill premium within firms in Indonesia – a country with a high share of unskilled workers. We present a new finding that reducing input tariffs reduces the wage skill premium...

A firm's productivity depends on how production is organized given the level of demand for its product. To capture this mechanism, we develop a theory of an economy where firms with heterogeneous demands use labor and knowledge to produce. Entrepreneurs decide the number of layers of management...

This paper calls into question the currently most influential model of international trade. An empirical finding by Trefler (2004, AER) and others that industrial productivity increases more strongly in liberalized industries than in non-liberalized industries has been widely accepted as...

We review a recent body of theoretical work that aims to put numbers on the consequences of globalization. A unifying theme of our survey is methodological. We rely on gravity models and demonstrate how they can be used for counterfactual analysis. We highlight how various economic...

Large multi-product firms dominate international trade flows. This paper documents new facts about multi-product manufacturing exporters that are not easily reconciled with existing multi-product models. Using novel linked production and export data at the firm-product level, we find that the...

The large reduction in tariff rates worldwide under several rounds of the GATT is commonly credited with being one of the most notable economic policy accomplishments since World War II. However, the remarkable progress towards free trade of goods is unparalleled in trade with services where...

A large share of world trade, especially among the OECD countries, is two-way trade within industries, so-called intra-industry trade (IIT). Despite this, few attempts have been made to examine why countries export some products within industries, whereas they import others. We examine this...